Compute the book value per share and value of share using dividend discount model.
1. Calculate the book value per share based on the reported stockholders' equity account for Bridgford Foods in fiscal year ending November 2, 2005:
Shareholder's equity ('000)
Preferred stock, without par value
Authorized-1,000 shares
Issued and outstanding-none
Common stock, $1.00 par value $10,505
Capital in excess of par value 17,475
Retained earnings 29,355
Total shareholders' equity $57,335
2. The Kummins Engine Company common stock has a beta of 0.9. The current risk-free rate of return is 5 percent and the market risk premium is 8 percent. The CEO of the company is quoted in a press release as saying that the firm will pay a dividend of $0.80 / share in the coming year and expects the dividends to grow at a constant rate of 7 percent for the foreseeable future. Using the constant growth model, what value would you assign to this stock?